Fed hawkishness puts gold on defensive as $4,200 floor looms

The Fed’s renewed emphasis on price stability acts as a direct headwind for the precious metal. According to Bart Melek, Head of Commodity Research at TD Securities, the market’s interpretation of Warsh’s comments has already pushed gold down by roughly $125, settling at $4,470 per ounce. Melek anticipates further losses, suggesting the metal will likely drift toward the lower end of the $4,200 to $4,700 trading range by the end of the year.

While the near-term outlook for gold remains pressured by higher short-term rates and a firmer dollar, the long-term thesis remains intact. Melek points to a projected target of $5,350 per ounce by the third quarter of 2027. This recovery hinges on the Fed eventually unwinding its tightening cycle once inflation stabilizes and weaker aggregate demand forces a shift toward the central bank's maximum employment mandate. Until that transition occurs, institutional and retail interest in gold as a portfolio diversifier is expected to provide fundamental support, particularly if prices offer more attractive entry points.